Correlation Between Endesa SA and EDP -

Can any of the company-specific risk be diversified away by investing in both Endesa SA and EDP - at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Endesa SA and EDP - into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Endesa SA ADR and EDP Energias, you can compare the effects of market volatilities on Endesa SA and EDP - and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Endesa SA with a short position of EDP -. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endesa SA and EDP -.

Diversification Opportunities for Endesa SA and EDP -

0.44

Correlation Coefficient

Endesa SA  EDP -

Very weak diversification

The 3 months correlation between Endesa and EDP is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA ADR and EDP Energias in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias and Endesa SA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Endesa SA ADR are associated (or correlated) with EDP -. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias has no effect on the direction of Endesa SA i.e., Endesa SA and EDP - go up and down completely randomly.

Pair Corralation between Endesa SA and EDP -

Assuming the 90 days horizon Endesa SA ADR is expected to generate 0.62 times more return on investment than EDP -. However, Endesa SA ADR is 1.6 times less risky than EDP -. It trades about 0.03 of its potential returns per unit of risk. EDP Energias is currently generating about -0.07 per unit of risk. If you would invest  1,072  in Endesa SA ADR on September 3, 2024 and sell it today you would earn a total of  26.00  from holding Endesa SA ADR or generate 2.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Endesa SA ADR  vs.  EDP Energias

Endesa SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Endesa SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EDP Energias

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Energias has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Endesa SA and EDP -

The main advantage of trading using opposite Endesa SA and EDP - positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA position performs unexpectedly, EDP - can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EDP - will offset losses from the drop in EDP -'s long position.

The idea behind Endesa SA ADR and EDP Energias pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.